The FAANG earnings season kickstarts next week as Netflix (NYSE: NFLX) releases its earnings for the first quarter of 2023. Here’s what all markets will look out for in the streaming giant’s earnings.
To begin with, the first quarter of 2023 would be different from Netflix for multiple reasons. Firstly, this would be the first full quarter for the company’s ad-supported tier.
Reports suggest that while the plan did not gain traction initially it has since attracted many users.
Secondly, during the quarter, Netflix slashed prices in multiple markets amid competitive pressures.
While the price cuts might have helped Netflix to attract – as well as retain users – price cuts invariably come at a cost of margins.
Also, in Q1 2023, Netflix doubled down on its crackdown on password sharing. Last year, it said that nearly 100 million households globally watch its content through shared passwords.
During their Q4 2022 earnings call, Netflix acknowledged that the password-sharing crackdown won’t be “universally popular” among its users.
It admitted, “From our experience in Latin America, we expect some cancel reaction in each market when we roll out paid sharing, which impacts near term member growth.”
Finally, it would be the first quarter under Netflix’s co-CEO Greg Peters after the company’s co-founder Reed Hastings quit in January.
Netflix to Report Q1 2023 Earnings Next Week
Analysts polled by TIKR expect Netflix to report revenues of $8.18 billion in the first quarter of 2023 – 4% higher than the corresponding quarter last year, and in line with the company’s guidance.
Analysts however expect the company’s adjusted EPS to fall 18.8% to $2.87 in the quarter. Notably, while Netflix reported better-than-expected revenue and subscribers for the fourth quarter, its profits trailed estimates.
When Netflix reports its earnings next week markets would look for color on possible cancelations after the password-sharing crackdown.
Also, analysts would look out for the subscriber numbers and commentary on the ad-supported tier.
Notably, Disney also launched its ad-supported tier in Q4 2022 as streaming companies look at newer ways to grow their subscriber base.
NFLX Stock is Underperforming in 2023
2022 was a tough year for FAANG stocks and all of them underperformed the S&P 500. Netflix was the second-worst performing FAANG stock last year – despite nearly doubling from the lows.
NFLX stock is up just under 15% for 2023 which is the lowest among FAANG peers. Meta Platforms is the best-performing FAANG stock by a wide margin and is up over 84% this year.
The Mark Zuckerburg-led company has embarked on an aggressive cost-cut exercise and has announced plans to lay off almost a quarter of its workforce.
During its upcoming earnings call, Netflix might also talk about its cost-cut initiatives.
All said, Netflix’s earnings would provide early insights into the FAANG sector. The once coveted group has lost some of its shine – and last year many started wondering whether Netflix and Meta deserve to be in the group.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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